Desincorporation

Desincorporation is the legal process by which a corporation ceases to exist as a separate legal entity. Through dissolution and winding up, the former corporation loses its corporate status, though liabilities incurred prior to dissolution are typically resolved during wind-up.

Desincorporation may be voluntary or involuntary. Voluntary desincorporation occurs when the board and shareholders approve dissolution according to laws and bylaws. Involuntary desincorporation can result from court orders, regulator action, insolvency proceedings, or administrative dissolution for noncompliance with filing or fee requirements.

The usual steps include: authorizing dissolution; filing articles of dissolution or equivalent documents; notifying creditors; appointing a liquidator or winding up the business; liquidating assets, paying debts, and distributing any remaining assets to shareholders; filing final tax returns; obtaining tax clearance where required; and cancelling licenses and deregistering with authorities.

After dissolution, the corporation no longer exists as a legal entity. During wind-up, corporate officers and directors have fiduciary duties to conclude affairs responsibly. Although the entity ceases to operate, certain obligations incurred during wind-up or before dissolution may survive, and liabilities may be pursued against the former corporation or its insiders as permitted by law.